Not the kind of May to sell

Raul3 Sun May 5, 2019 10:06am ESTComments Off on Not the kind of May to sell

But feel free to go away.

In general, we would do well to forget about our investments and let them work for us while we build more important things, like our character.

I work hard every Sunday to identify the key elements of the stock market to watch in the upcoming week. Then I define those factors as clearly as possible with pictures and words. It may seem like an odd public service of sorts, and it can be, but it’s also what has taken me to consistent profitability as a futures trader.

Last Sunday it was clear we needed to watch the Russell, and I tweeted as much:

Index Model is included in the Strategy Session every Sunday. The model attempts to predict market direction five days into the future, hence it needing to be updated every Sunday. The predictive portion of the model is useful, but it offers something much greater—context.

When the markets started moving fast mid-week, I had to reduce the number of futures contracts I follow because my analytical computer starts to lag. Since I had done my Sunday homework, I knew what was non-essential; the Dow, S&P, SOX, and TRANX.X. All I needed was the Russell and what I actually trade, the NASDAQ.

At that point, while popular traders were passing around the popular, “Sell in May, go away” mantra, I was simply watching the Russell bounce along its lower ATR band. Why else do you think I was able to add to my Tesla investment with near-perfect precision? An Elon Musk tweet? Please. I am a slave to no man’s word. Take a look at the last five days of trade on the Russell 2000, separated into 15 minute candles with volume profiles (volume at price) for each 24 hour day:

That’s all I wanted to reflect on for a moment. If you’ve ever thought about trading index futures but haven’t been able to sufficiently capitalize an account to handle the notional value of index futures contracts, you’re in luck. Beginning Monday, the CME is launching micro futures on the Dow, S&P, NASDAQ, and Russell. I think every trader should pick one of these markets and trade it exclusively for a few years. It will develop you much further than ferreting from one degenerate stock to the next.

Chop wood and carry water. We cannot just stop doing the things that brought us to where we are. Sunday research, highly concentrated tweets, compassion for others, and pulling lots of weeds.

This isn’t the kind of May to go away from trading. From fussing with your long-term investments? Yes. Do that now and thank me in four years.

I’ll still be here.

Raul Santos, May 5th, 2019

Exodus members, the 233rd edition of Strategy Session will be live by like noon eastern time. Be sure to check it out and for gods’ sake, if you have have questions ask.